Correlation Between HP and IShares Aerospace

Can any of the company-specific risk be diversified away by investing in both HP and IShares Aerospace at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining HP and IShares Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HP Inc and iShares Aerospace Defense, you can compare the effects of market volatilities on HP and IShares Aerospace and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in HP with a short position of IShares Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and IShares Aerospace.

Diversification Opportunities for HP and IShares Aerospace

-0.16

Correlation Coefficient

HP  IShares Aerospace

Good diversification

The 3 months correlation between HP and IShares is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and iShares Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aerospace Defense and HP is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on HP Inc are associated (or correlated) with IShares Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aerospace Defense has no effect on the direction of HP i.e., HP and IShares Aerospace go up and down completely randomly.

Pair Corralation between HP and IShares Aerospace

Considering the 90-day investment horizon HP Inc is expected to under-perform the IShares Aerospace. In addition to that, HP is 1.41 times more volatile than iShares Aerospace Defense. It trades about -0.13 of its total potential returns per unit of risk. iShares Aerospace Defense is currently generating about 0.1 per unit of volatility. If you would invest  14,738  in iShares Aerospace Defense on December 27, 2024 and sell it today you would earn a total of  975.00  from holding iShares Aerospace Defense or generate 6.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HP Inc  vs.  iShares Aerospace Defense

HP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

iShares Aerospace Defense

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Aerospace Defense are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares Aerospace may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HP and IShares Aerospace

The main advantage of trading using opposite HP and IShares Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, IShares Aerospace can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Aerospace will offset losses from the drop in IShares Aerospace's long position.

The idea behind HP Inc and iShares Aerospace Defense pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.